Thai Credit Guarantee Corp to focus on SMEs

The areas in focus are innovation SMEs, micro-SMEs – those seeking credit of up to Bt200,000 – and SMEs interested in investing in special economic zones (SEZs).

The corporation’s target is to guarantee Bt2 billion of lending for innovative SMEs, and Bt5 billion each for the other two categories over three years, he said. 

The amounts form part of its target to guarantee new loans of Bt80 billion this year, he added.

Micro-SMEs on average require a loan of about Bt100,000 per business, which means the TCG will be able to guarantee lending for up to 50,000 businesses through 2017, Vallobh said, adding that this should reduce the number of small firms having to use loan sharks. 

Meanwhile, the TCG is supporting government policy by guaranteeing lending to small firms investing in special economic zones, located in Mae Sot in Tak province, Aranyaprathet in Sa Kaeo province, Khlong Yai in Trat province, Sadao in Songkhla province, and in Mukdahan province. 

This programme ties in with the Government Savings Bank offering a special interest rate – minimum loan rate minus 2 percentage points – to small and medium-sized businesses that invest in these special zones. 

For innovation SMEs, the corporation has linked up with the Software Industry Promotion Agency to provide certification for firms creating innovative products or intellectual property, like animation, cartoons, software and applications.

When the agency certifies a business’s estimated innovation value, the amount can be used to apply for bank lending, at which time a business can apply for a loan guarantee from the TCG, he explained.

“This [access to credit] is a challenge for those in the young generation who want to be entrepreneurs and support the digital economy,” he said.

Meanwhile, the TCG will also support commercial banks and other financial institutions once the amended loan-guarantee law takes effect on February 11. 

Vallobh said this was decided after the Bank of Thailand, the Fiscal Policy Office, the TCG and 20 financial institutions met to discuss potential impacts and preparation for the amended law related to loan guarantees.

“The discussion went into the details and procedures to be abided by under the amended law for commercial banks and the TCG,” said the corporation chief.

He said more than 90 per cent of the banks’ credit was collateralised by people, and the banks now had to review their credit portfolios and management of collateral impairment, while new loans could be guaranteed by TCG, instead of by individuals.

An increase in TCG guarantees for loans from financial institutions is expected to be seen about six months after the amended law takes effect. 

Meanwhile, the corporation targets Bt80 billion in overall loan guarantees this year, based on the country’s economic growth coming in at 4.5 per cent. The effects of the amended law are excluded from the forecast.

While economic growth lower than 4.5 per cent is now seen as likely, the TCG has not cut its loan-guarantee target for the year out of expectation of more business from financial institutions, Vallobh said.

Last year, the TCG provided Bt61 billion of new guarantees in around 22,000 cases, giving it an accumulated total of some 130,000 cases and Bt270 billion. 

Its non-performing guarantees came in at 5.8 per cent at year-end, up from 3.6 per cent 12 months earlier due to the country’s economic slowdown.

The non-performing guarantee ratio is expected to be maintained at this level during the course of the year, Vallobh said.